The Role and Liability of Certification Organisations in Transnational Value Chains
In the course of the CSR debate, and also with the increasing risk of parent companies’ liability for the operations of their subsidiaries or even suppliers, corporate governance of such structures and monitoring of compliance of subsidiaries and suppliers (and evidence thereof) have become crucial. That task is often outsourced to specialised organisations that certify certain standards or processes if the requirements are met. For example, in the well-known cases of the factory fire of Ali Enterprises in Pakistan and the collapse of the Rana Plaza building in Bangladesh, several auditors had controlled (or claimed to have controlled) the relevant factories, for example, concerning fire safety and had issued related certificates.
Whilst practical and theoretical concerns relating in particular to the quality of solicited certification paid by the monitored business have been discussed in academic writing, for example in the context of solicited credit rating, the potential liability of certification organisations towards third parties, in particular victims of malpractice, has received little attention in the past. This has somewhat changed with the spectacular breast implant scandal around the French company PIP, in the course of which the German certification organisation TÜV Rheinland became the target of tort law claims of victims, where, however, specific issues of EU medical devices law were at the centre of the debate. Still, given the steep rise of the certification industry in recent past, the liability of certification organisations deserves broader discussion.
This paper will therefore explore potential grounds of liability of CSR certification organisations towards third parties, and also towards the parent company that may itself face tort law liability towards third parties, taking into account the specific functions that certification takes in transnational value chains.